Dynamic Capabilities in a High-tech
Born Global Firm: A Case Study
Riding the waves of change
Paper within Bachelor Thesis in Business Administration
Author: Jonathan Simon
Niklas Wahlberg
Tobias Wickman
Table of Contents
Abstract ... iii
1
Introduction ... 1
1.1 Background ... 1
1.1.1 The Firm ... 1
1.1.2 Overview of the Subject ... 1
1.2 Problem discussion ... 3 1.3 Purpose ... 4 1.4 Research Questions ... 5
2
Disposition ... 6
2.1 Theoretical Framework ... 6 2.2 Method ... 6 2.3 Empirical Findings ... 6 2.4 Analysis ... 6 2.5 Conclusion ... 7 2.6 Discussion ... 73
Theoretical Framework ... 8
3.1 Born Global ... 8 3.1.1 Dynamic Environment ... 10 3.1.2 Knowledge-Intensive Firms ... 12 3.2 Resource-based View ... 133.3 Dynamic Capabilities View (DCV) ... 14
3.3.1 The Evolving DCV ... 16
3.3.2 The DCV of Born Globals ... 18
4
METHOD ... 21
4.1 Research Approach ... 21
4.1.1 Qualitative Research Method ... 21
4.1.2 Semi-structured Interviews ... 22
4.1.3 Case Study ... 23
4.2 Research Strategy ... 24
4.2.1 Method of Data Collection ... 24
4.2.2 Interview Procedure and Strategy ... 26
4.2.3 Method of data analysis ... 27
4.2.4 Reliability ... 28
4.2.5 Validity ... 29
5
Empirical findings ... 31
5.1 The Company ... 31
5.1.1 The 2008 Financial Crisis ... 33
5.2 Cinnober through the financial crisis (secondary data) ... 34
5.2.1 Market Situation of 2007/2008 ... 34
5.2.2 Activities by Cinnober 2007/2008 ... 35
5.2.3 Market Situation of 2008/2009 (and after-effects) ... 36
5.3 The dynamic capabilities of Cinnober (primary data)... 38
5.3.1 Financial Crisis ... 44
6
Analysis ... 45
6.1 The born global firm Cinnober and Dynamic capabilities... 46
6.2 Dynamic Capabilites during the Financial Crisis ... 49
6.2.1 Adding real-time clearing to their product portfolio ... 50
6.2.2 Two step-figure ... 51
7
Conclusion ... 55
8
Discussion ... 57
References ... 59
Articles 59 Books 62 Websites 62Appendices ... 64
Figures 64 Figure 6 - Questionnaire ... 68Abstract
This thesis involves a case study of Cinnober, a financial technology company based in Stockholm, Sweden, that demonstrates how a born global firm adapts, evolves and survives in a highly dynamic environment. The purpose of this thesis is to contribute to the dynamic capability view (DCV) of born globals by identifying and examining the main dynamic capabilities of Cinnober. This thesis utilizes a qualitative method, whereby data has been collected from face-to-face interviews and Cinnober’s financial information. The interviews were conducted with three top managers employed at Cinnober, who are experienced and knowledgeable about the firm’s business strate-gies and capabilities. The main dynamic capabilities important for Cinnober were iden-tified and examined. Another important finding was the interrelatedness between dy-namic capabilities and non-dydy-namic capabilities, both being able to affect each other and contribute to seizing new opportunities (e.g. creating a new product in response to changing demands). The relationships were expressed by the authors through the development of a new two-step model involving the processes of (1) opportunity recognition and (2) opportunity seizure.
1 Introduction
The first component of this introduction will include a background. This will describe the firm selected for this case study, and the subject matter, which will briefly intro-duce the two main concepts of born global firms and the dynamic capabilities that these firms may possess. The section after that will involve a problem discussion, de-scribing and motivating the existence of a gap and demonstrating the need for further case studies in this research area. The final part of the introduction will explain the purpose of this thesis and the main research questions.
1.1 Background
1.1.1 The Firm
This thesis will perform a case study of a Swedish software company called Cinnober Financial Technology AB. Since the company was founded in 1998, it has had an inter-national approach, offering software products and services for banks, financial institu-tions and exchanges all over the world. While the firm operates in a dynamic high-technology market, it is also heavily influenced by the financial sector (assisting in transactions in financial markets) (Cinnober website).
A significant event in the firm’s history was during the 2008 financial crisis. This was a period that had a worldwide impact and was characterized by an economic collapse with the government bailout of banks, a crash in the major stock markets, and the col-lapse of large financial institutions (e.g. Lehman Brothers Holdings Inc.). During and around this event, the landscape of the financial sector shifted significantly in terms of new rules and regulations. Companies such as Cinnober, operating in highly dynamic and fast-changing market conditions, had to adapt their technologies and respond with immediacy and efficiency to the changing environments in order to survive.
1.1.2 Overview of the Subject
Contemporary history is characterized by increased globalization and technological ad-vancements. The technology industry is rapidly evolving and it is apparent that
techno-logical changes in information, transportation, and communication have contributed towards the shrinkage of physical and cultural distances, causing many firms to inter-nationalize early in their existence (Cannone & Ughetto, 2012).
Firms that adopt a global market strategy – entering foreign markets by exportation or other mode of entry – at the start or early stages of their existence are often referred to as born globals (Knight & Cavusgil, 2004). According to Cannone and Ughetto (2012), it is often the case that born globals are small-sized technology firms which de-velop a global strategic vision. How do these types of firms, competing in foreign mar-kets, adapt to highly dynamic environments characterized by rapid changes in technol-ogy? This can lead to the discussion of dynamic capabilities (as an important factor be-ing able to adapt) described by Barreto (2010, p. 271):
“The firm’s potential to systematically solve problems, formed by its propensity to sense opportunities and threats, to make timely and market-oriented decisions, and to change its resource base”
An example that illustrates the concept of dynamic capabilities more simply can be taken from a software company researched by Aramand and Valliere (2012). One of the firm’s resources (or more specifically, an internal capability) is product design. The company’s specific software development method allows them to alter the design of their software to respond to changing environments, especially changes in customer needs. Being able to change or modify their design is a dynamic capability of the firm. This paper will refer to internal capabilities that are not dynamic as ordinary or stantive (used interchangeably). For example, a firm’s product design may be a sub-stantive capability if it is kept the same as there is no need for the design to change, or the firm is unable to change it. The dynamic capabilities concept and more examples will be further explained and presented in the theoretical framework.
Cinnober is a high-tech born global as it is a software company that was established with a global strategic vision, internationalizing from the start. A high-tech market is a
market where there are innovative and cutting-edge technological developments pre-sent and their improvements are occurring frequently (Oxford Dictionaries, 10/5-14). As Cinnober has customers in various countries around the world with different finan-cial regulations to comply with, the company has had to (and still does) adapt to a highly dynamic environment, where conditions are varying for different foreign mar-kets. Therefore, it is imperative and instructive to identify and analyze the dynamic ca-pabilities that the firm uses to understand how it adapts and survives in the long run.
1.2 Problem discussion
When concurrently searching online for literature that specifically discusses born glob-als (or international new ventures) from the dynamic capabilities view (DCV), there are very few articles that surface. Some of the key words and phrases used to search through multiple online databases included “dynamic capabilities”, “DCV”, “born glob-al”, and “international new venture”. Weerawardena et al. (2007) is one of the articles that surfaced, discussing born globals from a dynamic capabilities perspective. The au-thors state a number of propositions, but also point out the limited amount of re-search currently in the area of dynamic capabilities of born globals. Although this arti-cle has been cited by many other published artiarti-cles, very few of them focus on the DCV of born globals.
“More research is required to determine the kinds of environments in which the dy-namic capabilities concept is most relevant” (Barreto, 2010, p. 276). Barreto (2010) al-so points out that there are few studies that have researched specific types of firms (in terms of size or sector) in the context of dynamic capabilities, and which types are most likely to benefit from them. For example, the article mentions that dynamic ca-pabilities could be important for public sector organizations due to the frequency of change in regulations and policies determined by the cycle of elections. Although Cin-nober is not in the public sector, it is affected by the financial sector where rules and regulations change and vary between different countries.
Another motivating factor for investigating born globals is that it relates to Teece’s (2007) statement which advocates that multinational companies in global markets are especially relevant to research in the DCV. Born globals usually manage their capabili-ties and reconfigure them in a way so they can rapidly create a competitive advantage and expand in global markets (Knight and Cavusgil, 2004). This is what normally distin-guish born globals from other firms, as they possess a certain adaptation skill and a specialized business model (e.g., Knight and Cavusgil, 2004; Teece et al., 1997). This can easily be integrated into different business environments consisting of varying technology standards and regulations. Born globals also seem to focus more on their capabilities, when it comes to internationalization, than other similar organizational forms (Jantunen et al. 2008). Therefore, the authors of this thesis believe that examin-ing born globals’ utilization of their capabilities will allow progress to better under-stand these firms’ abilities to remain competitive and survive in the long run.
The technology industry is an interesting and relevant area of focus, as it is character-ized by a rapidly changing environment (Weerawardena et al., 2007). According to Au-dia, Locke and Smith (2000), technology is ranked as critically important to the interna-tional success of born global firms. It is a necessary tool for adapting to environmental changes and avoiding negative firm performances. Aramand and Valliere (2012), in their case study of the dynamic capabilities of software companies, emphasized the importance of understanding how a firm responds to changes in environment by changing and improving its internal capabilities. Taking this into consideration compels closer scrutiny of the dynamic capability view in the context of a high-technology born global firm such as Cinnober.
1.3 Purpose
By conducting a case study on a high-tech born global firm, this thesis aims to contrib-ute to the field of the dynamic capability view of born globals by exploring their firm-specific dynamic capabilities. This case aims to serve as an example for understanding how a firm in a rapidly changing environment changes and modifies their capabilities to adapt and survive in the long run.
1.4 Research Questions
- What are the dynamic capabilities of a high-tech, knowledge-intensive, born global firm?
- Which dynamic capabilities allowed the born global firm to respond to the dynamic environment during the financial crisis?
2 Disposition
2.1 Theoretical Framework
In this section, the authors will summarize all the relevant theories necessary to grasp when dealing with this paper’s purpose. First, the theory of born globals will be de-scribed. Thereafter the dynamic environment that is characteristic of born globals will be explored. The aspect of knowledge-intensity, characteristic of a high-tech market, will also be discussed. After that, the resource-based-view (RBV) will briefly be ex-plained for introductory purposes for the dynamic capabilities-view (DCV), which is an extension of the RBV. Thereafter, the main view about the DCV will be explained, in-cluding how it is defined, examples of dynamic capabilities, how the view has evolved, and the current research on the DCV of born globals.
2.2 Method
As research was conducted to form this thesis and to finalize it, the authors will in this section describe the different methods implemented to gather essential data. This sec-tion will also inform the reader about the strategy that was put in place to guide the authors through the collection period and the analysis part of the data. The reliability and validity of the data will also be clarified in this part.
2.3 Empirical Findings
The data gathered from the research method implemented will be summarized in this part to bring some clarity to the reader of what the authors were able to gather. Here, the reader will get an overview of the different categories of data that the authors es-tablished from the completed data. Some parts of this section will also be used in the analysis section to connect the data to the thesis’s purpose, using theory from the theoretical framework (primarily regarding the DCV).
2.4 Analysis
This part will include the authors’ own reflections on the data that has been gathered and processed, as those thoughts are genuinely based on the theories from the
theo-retical framework. Then it is connected with the matter from the data established from the empirical finding section of the thesis. Concluding, the reader will be able to visual-ize how the formerly brought up theories connect to the empirical findings.
2.5 Conclusion
In the conclusion there is a summary of the analysis previously observed. The reader will in this section get a more in-depth overview of the central analysis parts that the authors of the thesis have established previously.
2.6 Discussion
This part will conclude the thesis with a discussion about the findings and the drawn conclusion of it all. Limitations to the thesis are provided here as the authors reflect on the process of thesis. At the end there will be suggestions for further research based on discoveries from the process on this thesis.
3 Theoretical Framework
3.1 Born Global
The reason why born globals are interesting for our thesis is because of their capacity to go international so early by utilizing their resources and capabilities to extract com-petitive advantage on a global scale. Born globals are normally very good at estimating market risk and reward, and the rapid changes occurring in dynamic environments (Rennie, 1993). How they tackle these changes and risks can be observed by looking at their dynamic capabilities (Winter, 2003). Therefore we think it is informative to exam-ine and observe born globals in knowledge-intensive high-tech markets as they usually base their decision to expand internationally by containing deep knowledge and un-derstanding of their internal skills and expertise (McNaughton, 2001).
Most of the scholars (e.g., Knight and Cavusgil, 2004; Hennart, 2013; Madsen and Ser-vais, 1997) touching upon the topic of born globals and their origin seem to agree that the definition of this business structure and manner is;
“That they from inception, seek to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries.”(Oviatt and McDougall, 1994, p. 49)
In other words, they pursue their business outside national borders at a very early stage to reach a maximum level of performance with commonly high competitive re-sources/capabilities such as knowledge and innovation (Knight and Cavusgil, 2004). Born globals recognize very early that their business is suitable for the global market (Hennart, 2013). This is normally evident in how they structure their re-sources/capabilities by involving flexibility and customization into their routines so they can attain solid and healthy customer affiliations (Madesen and Servais, 1997).
interna-clarifying its origin. Hennart (2013) argues that there are three agreed upon factors to born globals’ existence. The first factor which is significant for a born global is a unique resource/capabilities that contributes to the firm’s competitive advantage on a global scale. It explains why born globals are heavily represented in niche markets, because of their smaller size but highly remarkable expertise (Efrat and Shoham, 2012). The low amount of monetary assets committed when entering an international market is the second factor mentioned, which is deeply dependent on the firm’s network and con-tacts. If the extent of contacts is high in a foreign market, then there is an increased possibility for the firm to succeed. Because of important guidance and tips commonly given from the network to achieve a successful market penetration (e.g., Efrat and Shoham, 2012; Gabrielsson and Kirpalani, 2004; Coviello and Munro, 1997; Oviatt and McDougall 2005). Therefore it is not common that a born global firm over-invest in un-known businesses abroad. The third factor Hennart (2013) mentions is the cheaper transportation and the improved communication accessibility between suppliers and customers, for example internet. These three factors provide the basis for the growth of a born global firm. From this there are also evolved born globals that have other fac-tors integrated into their business model. These facfac-tors are often knowledge-, tech-nology-, innovation- and learning-associated (Rialp et al., 2005).
Knowledge for a born global firm can be related to the learning theory of how to man-age and adopt newly attained resources and competencies (Sapienza et al., 2006), (Oviatt and McDougall, 2005). Research states that it benefits born global firms to or-ganize how they manage their knowledge because it normally results in aiding the firm to discover opportunities and reduces the sense of foreignness when entering new markets (e.g., Zahra et al., 2000; Sapienza et al., 2006; Oviatt and McDougall, 2005). Without the ability to gather knowledge, any firm would have difficulties in sustaining its position in a foreign market. Knowledge in the born globals internationalization is consisting of collecting and integrating the knowledge acquired from the market and the knowledge-intensity involved in managing the firm’s products/services (Chen et al., 2012; Oviatt and McDougall, 2005).
Where this knowledge comes from has been discussed many times and the overall conclusion is that it usually originates from two sources. It is either prior knowledge that the entrepreneur has obtained through his/her career and/or the companies’ network width and expertise (Grant, 1996; Oviatt and McDougal, 2005). What knowledge basically does in born globals’ internationalization process is lowering the risk involved in their newly discovered business opportunities abroad, which also ex-plains why born globals commit so quickly to international markets (Zahra et al., 2000; Madsen and Servais, 1997). It is because they can act with higher certainty than per-haps other players in the same market (Madsen and Servais, 1997).
These born globals possess dynamic capabilities that are developed to handle market alterations and varying customer needs on a global scale (Sapienza et al., 2006). The modifications or customizations required by born globals to satisfy their international customers, reflects the need for born globals to utilize their dynamic capabilities. To generate customer satisfaction and market-competitive products/services that may re-sult in creating a unique international competitive advantage (Hennart, 2013).
3.1.1 Dynamic Environment
For a born global firm it is vital to be able to scan their market and pinpoint opportuni-ties that can be further developed into business opportuniopportuni-ties (Teece et al., 1997). Therefor the authors believe that recognizing the rapidly changing market environ-ment, where most of the high-tech born globals are present in (Knight & Cavusgil, 2004), will shed light on Cinnober’s approach to their dynamic capabilities when it comes to adapting to rapid changes in dynamic environments.
Dynamic environments are markets where rapid changes and developments are fre-quently occurring, and where active players must be aware of the continuous modifi-cations required to compete (Lin and Wu, 2014). These sorts of environments have de-veloped in parallel with the growth of globalization. The opening up of borders has re-sulted in a decrease in transaction costs and a widespread communication platform
nationally (Knight and Cavusgil, 2004). Born globals are normally small-medium sized companies that are able to take full advantage of these variables existing in the dy-namic environments (Rennie, 1993). They are able to do this because of the flexibility integrated into their business model and closer customer relationships compared to the larger established firms acting in global markets.
Where these born globals also differ from other international firm structures are their diminished administrative restrictions (Knight and Cavusgil, 2004). When a firm de-cides to expand rapidly, it can be difficult to efficiently embrace the new routines and knowledge necessary to compete in the new market. Born global firms usually have a low-hierarchy and less strict organization that assists the company to avoid clashes with old and new routines that frequently occurs otherwise when entering a new dy-namic business environment (Efrat and Shoham, 2012). Less administrative obstacles can benefit managers to make faster decisions when it comes to investing in new busi-nesses and products. It also welcomes a more flexible structure in the firm, where in-formation flows freely between the different work sections to enhance the experience-sharing and collaboration possibilities. It is also related to the firm’s business model (Hennart, 2013). How the firm decides to integrate flexibility into their prod-ucts/services to generate the best possible customer satisfaction to their customers that have different needs.
The development of internet and smartphones, has improved the communication be-tween buyers and suppliers all over the world as we mentioned earlier. It has also made an impact on the preferences of products in the global markets (Laanti et al., 2007; Knight and Cavusgil, 2004). Assumingly, the importance of being available inter-nationally has grown because of the understanding of customers’ accessibility to ob-tain products from all over the world. It has also led to products developing into more standardized products that can function with excellence in several regions of the world. This is in contrast with old goods that were generally country-constrained (Knight and Cavusgil, 2004). This has allowed born globals to pursue sustainable supe-rior value and performance on a global scale, which keeps them intensely competitive
in their small niche markets where the MNE are usually not superior (Efrat and Sho-ham, 2012; Knight and Cavusgil, 2004).
3.1.2 Knowledge-Intensive Firms
In rapidly changing environments it is crucial to be aware of recent market changes and growth/declines that might have an effect on the firm’s dynamic capabilities and make the firm’s product/services inferior (Efrat and Shoham, 2012). In certain markets firms are required to predict changes before they even occur. In this section, the thesis therefor provides an explanation on the importance of knowledge and its impact on born globals.
Born globals are mostly present in several different foreign markets at the same time. These markets can be both high-tech and low-tech environments where they are able to provide a significant value-adding product/service (Weerawarden et al., 2007). In some markets the knowledge capability is more crucial than others, for instance in markets where it is considerably important to be able to adapt to rapid changes by col-lecting and learning new knowledge (Autio et al., 2000). It is usually high-tech firms that possess this knowledge-intensity. They transform learned knowledge into some-thing that gives them a unique competitive advantage on a global scale (Oviatt and McDougal, 2005). In a way, the more the firms strive to obtain new knowledge the more likely they will succeed to integrate important processes that can be revalued and become vital for future businesses (Autio et al., 2000).
“Perhaps in today's hypercompetitive environment what may be most important is not how much a firm knows going in, but how quickly it can learn (D'Aveni, 1994).” (Autio et al., 2000, p. 919).
This quote is an interesting insight into knowledge-intensive firms, where their meth-ods to achieve competitive advantage does perhaps not lie in what knowledge they possess, but more in how they convert it into something valuable. What Autio (2000) argues is that the problem for high-tech born globals is not how to assemble new
knowledge and avoid competitors imitating their business. The problem for these companies is how to preserve their most valuable and dynamic knowledge base (Star-buck, 1992). This knowledge base can decrease by either unreplaceable employees de-ciding to move on or firms’ possessing resources or capabilities that are out-of-date in their business market.
3.2 Resource-based View
Prior to the initial development of the dynamic capabilities view, the resource-based view (RBV) as a part of the strategic management, was first introduced by Wernerfelt (1984). It is important to understand what the RBV is in order to know how the dynam-ic capabilities view came into existence as an extension of the RBV.
The RBV provides a framework that is used to explain how firms gain competitive ad-vantages through the application of set (static) bundles of resources (Eisenhardt and Martin, 2000). For example, a company with experienced employees that have excep-tional expertise in a particular field (an example of a human capital/resource) might provide a competitive edge against other close competitors in the same industry. In addition to a firm having a unique set of resources, it must also possess its own capa-bilities, which “refer to a firm’s capacity to deploy resources, usually in combination, using organizational processes, to affect a desired end” (Amit & Schoemaker, 1993, p. 35).
Various scholars have pointed out that one of the main limitations of the RBV is that it does not explain how firms maintain a competitive advantage in changing environ-ments (e.g., Barreto, 2010; Priem & Butler, 2001). Put another way, the RBV does not provide a solution as to why the success of firms with the same resources and capabili-ties are not equal (Eisenhardt and Martin, 2000). The dynamic capabilicapabili-ties view (DCV) seeks to address this particular gap in the RBV.
3.3 Dynamic Capabilities View (DCV)
The DCV, since its inception toward the end of the 1990s, has become more widely ac-cepted among scholars and it is a topic that has become increasingly popular to re-search in the academic field of strategic management (Aramand & Valliere, 2012). Bar-reto (2010, p. 260) mentions the concept of dynamic capabilities first being defined by Teece and Pisano (1994) as “the subset of the competences and capabilities that allow the firm to create new products and processes and respond to changing market cir-cumstances”. Later, Teece and colleagues (1997, p. 516) redefined dynamic capabilities as “the firm’s ability to integrate, build, and reconfigure internal and external compe-tences to address rapidly changing environments”. The research paper by Teece and colleagues (1997) is regarded as possibly the most influential study on the topic of dy-namic capabilities (Barreto, 2010). Their research provided a dydy-namic capabilities ap-proach to address the gap, how some firms are able to remain competitive in changing environments, that could not be filled by the RBV. Teece and colleagues’ approach to building the DCV was by the assimilation of a number of key theoretical components and assumptions (Barreto, 2010, p. 259):
1. A dynamic capability is an extension of the RBV, being a special type of capabil-ity (also categorized as an ‘abilcapabil-ity’ or ‘capaccapabil-ity’).
2. The purpose of this special capability is to “integrate (or coordinate), build, and reconfigure internal and external competences”.
3. The focus is on a specific external context – that is, “rapidly changing environ-ments”.
4. A dynamic capability is assumed normally to be “built rather than bought”. It is created and changed through the organizational processes that are formed by the company.
5. There is heterogeneity across firms with regards to their dynamic capabilities “because they rest on firm-specific paths, unique asset positions, and distinc-tive processes”.
6. The assumed outcome of the possession of dynamic capabilities by a firm is a sustained competitive advantage.
Further explaining the importance of the DCV, in order for a firm to maintain its com-petencies and resources, and create (and utilize) new comcom-petencies and resources against fast-changing environments, it is necessary to possess dynamic capabilities (Teece et al., 2007). Dynamic capabilities enable a firm to change their competences and resources to respond to fast-changing environments. This in turn, may allow the firm to gain competitive advantage and survive in the long run. Similarly stated, the main proposition of the DCV is “…that firms with dynamic capabilities are better equipped to deal with changing environments and, in consequence, to perform better” (Barreto, 2010, p.271).
Specific examples of possible dynamic capabilities (Eisenhardt & Martin, 2000, Ara-mand & Valliere, 2012):
Development routines – whereby managers employ their variety of skills and abilities to develop profitable products and services
Strategic decision-making – using various personal, business, and functional ca-pabilities to make decisions which form the strategies implemented by the firm. For example, in a changing environment, is a firm able to significantly alter its strategic decisions in order to adapt?
Product design
Project management
Customer service
Put in another way, “dynamic capabilities are regarded as a transformer for converting resources into improved performance” (Lin and Wu, 2014, p.407). However, measuring the effects of dynamic capabilities on firm’s performance is very difficult (Barreto, 2010). Using the software company example from the background, even if the firm’s dynamic product design capability causes it to respond exceptionally fast to changing customer needs, the impact of this dynamic capability is not quantifiable.
Before analyzing these kinds of capabilities for a company, it is not assumed that they are dynamic. For example, perhaps a company has ‘product design’ as a capability, but the firm is unable to change or modify it. Al-Ali and Teece (2014, p. 105) explain that
dynamic capabilities “…are higher-order capabilities in the sense that they govern how the organization’s ordinary capabilities are developed...and combined”. In the case where a firm’s capability is not dynamic, or it has not been analyzed yet to determine if it is dynamic, this paper refers to such a capability as an ‘ordinary’ (or ‘substantive’) capability of the firm.
In order to measure the degree to which a company can change and modify its ordi-nary capabilities (i.e. whether a company has a high, moderate or low degree of dy-namic capabilities) it is important to understand “...the frequency of changes and the source of changes in their substantive capabilities” (Aramand & Valliere, 2012, p. 154). For example, a software company may have a high degree of dynamic capabilities if their project management skills and design and development skills are changed and modified throughout an entire duration of a project. In contrast, another software company might only change and modify its ordinary capabilities at the start of a pro-ject and not change them for the remainder of the propro-ject. In this case, the software company would have a low degree of dynamic capabilities.
3.3.1 The Evolving DCV
In recent years, the DCV has evolved in different ways. As mentioned by Barreto (2010, p. 257), the growing academic research on the DCV “…has provided successive and dis-tinct definitions of the construct”. The creation of various definitions of dynamic capa-bilities demonstrates that this approach is still in its early stages, and shows the signifi-cant amount of interest generated by this topic. However, the proliferation of defini-tions also creates some confusion that may prevent research of the DCV from pro-gressing effectively. Some authors define dynamic capabilities as ‘abilities’ (or capaci-ties), while others describe the concept in terms of ‘processes’ or ‘routines’. Therefore, Barreto (2010, p. 271) formed a new definition to accommodate the various interpre-tations of dynamic capabilities:
“The firm’s potential to systematically solve problems, formed by its propensity to sense opportunities and threats, to make timely and market-oriented decisions, and to change its resource base”
This way of describing dynamic capabilities incorporates the different variations that have arisen since the concept was first introduced by Teece and colleagues (1997). It also fits perfectly with this case study of Cinnober, and especially regarding problems, opportunities and changes in resources (or capabilities) associated with the financial crisis.
In addition to the various definitions of dynamic capabilities, different researchers have been focusing on different outcomes. For example, some authors have explored firm performance as the outcome, while other researchers have used processes or or-ganizational outcomes. And while some articles have focused on the maintenance and development of dynamic capabilities, others have merely paid attention to the exist-ence of these capabilities (Barreto, 2010). As this thesis intention is to investigate the existence of these capabilities.
More recently, Aramand and Valliere (2012) have explored the relationship between entrepreneurial capabilities (the ability to discover new opportunities in the market) and dynamic capabilities, how each reinforces the other, through carrying out a case study on three different software firms. Additionally, the authors developed “...a new method to capture the dynamic capabilities through capturing changes in ordinary ca-pabilities” (Aramand & Valliere, 2012, p. 142). Their conclusion included the figure (Fig. 4, p. 155) below to illustrate the relationship between opportunity recognition and dy-namic capabilities:
Opportunity Recognition Substantive Capabilities
(See figure 1 – appendices)
The relationship they found was that dynamic capabilities, substantive capabilities and opportunity recognition are interrelated; one can lead to the other and vice versa. This conclusion was reached by discovering that the three companies analyzed in this study learned to use an agile design and development method over time. This has enabled them to take advantage of opportunities in the market through change and modifica-tion of their skills in design and development. Addimodifica-tionally, taking advantage of oppor-tunities in the market has allowed them to alter their ordinary capabilities, which has led to stronger dynamic capabilities. Although this thesis does not focus specifically on the relationship between entrepreneurial capabilities and dynamic capabilities, the as-pects of opportunity recognition and taking advantage of opportunities are highly rele-vant to the DCV of a company operating in a dynamic environment (Aramand & Val-liere, 2012).
3.3.2 The DCV of Born Globals
As mentioned previously in the problem discussion, the research of specifically born globals from the DCV is limited. Weerawarden et al. (2007) is one study that investi-gated the factors that contribute to accelerated internationalization of born global firms. The authors reviewed previous literature on capabilities relevant to successful born globals. In doing so, they developed a number of propositions, some of which are listed below:
“The owner-manager’s profile is positively related to market-focused learning capability in accelerated internationalizing firms” (p. 300). In other words, ac-quiring market knowledge is an important capability of the top management of a firm.
“Market-focused learning capability is positively related to the development of knowledge intensive products in accelerated internationalizing firms” (p. 302).
“Internally focused learning capability is positively related to the development of knowledge intensive products in accelerated internationalizing firms” (p. 302).
“The development of knowledge intensive products relates to the firm’s accel-erated internationalization” (p. 303)
Note, however, that the authors use the term “capability” rather than “dynamic capa-bility” as it is not assumed that such capabilities are always dynamic (i.e. being changed or modified) for every firm. Based on their research, and in summary of their propositions, the authors conjecture that born globals with a set of (dynamic) capabili-ties that are built and sustained allow for the creation of leading-edge knowledge in-tensive products in high-tech markets.
A more recent study by Al-Aali and Teece (2014, p. 95) also finds that “strong dynamic capabilities coupled with good strategy work together to generate and sustain superior enterprise performance in fast-moving global environments”. To analyze a born glob-al’s dynamic capabilities, the authors suggest a framework that looks into the dynamic capabilities that are relevant to three processes (p. 107):
1. Sensing – the process of identifying and assessing opportunities domestically and internationally. This relates to Figure 1 in terms of opportunity recognition. 2. Seizing – using resources (including capabilities) to address these opportunities
and obtain value as a result of doing so.
3. Transforming – “continued renewal”. For example, “selectively phasing out old products” and “changing business models, methods, and organizational cul-ture”.
The propositions by Weerawardena et al. (2007) and Al-Ali and Teece framework can be combined to illustrate a hypothetical example. Suppose a firm’s market-focused
learning and internally focused learning capabilities improve over time. These im-provements allow the capabilities to be categorized as dynamic capabilities. Further-more, these dynamic capabilities give the firm a competitive advantage in terms of be-ing able to (1) sense new opportunities (due to better business intelligence) in a dy-namic environment. Since the market-focused learning and internally focused learning capabilities also contribute to developing knowledge intensive products, this also helps in (2) seizing new opportunities (developing new products in response to a changing environment). Over time, the firm continues to (3) transform by, for example, phasing out its older products in favor new ones that are better adapted to the current market conditions. Note that, in this example, only two dynamic capabilities are mentioned. There could easily be more dynamic capabilities (e.g. product design capability, strate-gic decision-making, etc.) involved in these three processes.
4 METHOD
In the first sections of the method the authors will attempt to describe and convince the reader why this specific method structure was chosen for this particular paper’s purpose. It will contain an explanation of how the qualitative method selected and the gathering of secondary data gave the authors some in-depth knowledge about the firm and its capabilities. It will also include a short description about the interviewees to give the reader a better understanding of why they were selected and their contribu-tion to the firm in focus in this paper. This seccontribu-tion will also aim to illuminate how the authors of the paper accessed data and afterwards processed it. The final part of the discussion of this method will explain the reliability and validity of this method. This will add some clarity to the trustworthiness of the data gathered through the method implemented.
4.1 Research Approach
After the construction of the purpose, the authors acknowledged that the paper de-manded data that contained complex corporate information with a clear connection to the firm’s dynamic capabilities. This data was necessary in order for the authors to fully understand the dynamic capabilities at Cinnober (the process of selecting Cinnober and Case study in our research is explained in the case study section of the method)
To expand the view on how the selected firm Cinnober adapts their recognized dynam-ic capabilities when they face rapid changes in their market, a certain event was in-cluded in the thesis to get an accurate explanation of the process. The event chosen was the financial crisis occurring 2008-2009, where the market experienced fast changes (annual report 2008/2009). The authors believe that the firm’s adaption skills used during this hectic period will serve as a good example for the reader to know how their dynamic capabilities are used.
4.1.1 Qualitative Research Method
A qualitative research method contains devices that gather and apprehend data more in-depth than its counterpart quantitative research method (Bryman & Burgess, 1999).
As Bryman and Burgess (1999) argue; the essence of doing a qualitative method is to get an insider perspective on the issue in question, and see how the interviewee per-ceives the situation. This insider perspective was necessary to properly accomplish this thesis’s purpose, as mentioned previously. If this method was not selected there was an anticipated risk from the authors that other research methods would not generate the same preferable multi-faceted data as could be derived from a qualitative method (Bryman & Burgess, 1999). Another benefit with conducting a qualitative research method is that the conductor and the respondent are able to reach a relationship level where they achieve some sort of understanding of each other. This would enable them to go deeper into the conversation, and from an interviewer perspective, discover un-expected new data.
4.1.2 Semi-structured Interviews
The upside with a semi-structured interview is that it can access information that has been newly discovered by adding follow-up questions (Wengraf, 2001). It gave the au-thors the option for adjustments when, for example, the interviewee mentioned a key phrase or word that has never been brought up before which seemed necessary to add to the paper and therefore needed to be further explained. Eisenhardt and Martin (2000) mention in their article that dynamic capabilities are ambiguous, and this is one of the arguments for conducting our interviews in a semi-structured manner as it adds extra flexibility to the process (Bailey, 2007). An example of this flexibility was when in the second interview the respondent mentioned project management and the authors wanted to have further clarifications of their procedures and job description. The au-thors felt a misconnection between capabilities and project management. The re-spondent clarified and the authors received further insight as to how Cinnober func-tions and how project management is used to maintain customer relafunc-tionships.
There are many different approaches when conducting a qualitative research. It can be for a grounded theory purpose, where the purpose is to create a theory built on the collected data. Another qualitative research method strategy can be a case study per-spective where the purpose is for example investigating how a firm, in their
environ-ment, can relate to certain academic business theories (born-global and dynamic-capability-view). This single case study structure is called a holistic approach (Yin, 2003). It is what this thesis has embraced as a method strategy because of the decision to only focus on a single firm and their dynamic capabilities.
4.1.3 Case Study
The purpose behind choosing a single case study was because the authors aimed to test a proven theory about dynamic capabilities in a born-global context, and see if the firm had experiences that could be useful for further research. Eriksson and Kovalainen (2008) argue that a case study should not be viewed as a method itself but more accu-rately as a strategy within a method. What a case study should reflect is a detailed and complex view of a chosen context (Eriksson & Kovalainen, 2008). The reason behind it should be that the topic itself is complicated and needs to be examined through a case example to portray a simplified version of what the research purpose is based on (Fly-berrg, 2006). An interesting perspective shared by Flyberrg (2006) is that there are several misconceptions when it comes to case studies reliability. Some people believe that a case study cannot be based on just one individual case and that its content is bi-ased towards a successful verification of the author’s hypothesis. However, Flyberrg argues for the opposite and that case study strategy has often been heavily criticized on false assumptions, and that it should not be doubted just because it is arranged dif-ferently than for example a quantitative method.
The case study of this thesis is represented by a Swedish firm called Cinnober. The au-thors found the representative born global firm Cinnober through the auau-thors’ net-work connections. It was from the authors’ perspective an interesting firm to look into because they are spread out over the world and that the firm’s experience could bring some insight to how managers handle their work internationally. One of the selection criteria that Cinnober fulfilled was their market. Their market is characterized by rapid changes and knowledge-intensity, where it is crucial to be updated and flexible to sat-isfy customers. The second criterion was the firm’s structure and international familiar-ity, a firm that could be defined under the born-global theory. This criterion was
ful-filled because the firm went international from the early beginning and they are still active in many different countries.
4.2 Research Strategy
To form an efficient research strategy the authors had to first and foremost recognize what had been previously explored, and what those researchers suggested their read-ers to look further into. The authors went through the Scopus (a journal database on internet), school library and its database for articles touching upon the subject dynam-ic capabilities, born-globals and knowledge-intensive. This background check was nec-essary because it aided the authors to have some foundational knowledge about the subject. Thereby extrapolate and accurately predict which research strategy was best suited to serve the purpose of the paper. Some of the most useful articles discovered were Barretto (2010), Eisenhardt and Martin (2008) and Knight and Cavusgil (2004). These three articles helped the authors with the creation of the purpose by highlight-ing the existence of a gap in the research of dynamic capabilities.
When the processing of articles was complete, the authors took a closer look into Cin-nober through their website and old newspaper-articles to get an appropriate estimate of their products, market and customers. The purpose behind this was to produce a re-search method that could extract the most information as possible. These steps pre-pared the authors to conduct the most crucial part of the method section, the primary data collection and data analysis.
4.2.1 Method of Data Collection
The first contact we made with Cinnober was a scheduled meeting in March 2014 with the Deputy CEO, where the authors of the thesis had a short presentation about our education at JIBS and the purpose of writing a thesis from a case study perspective. We got a very welcoming response to this idea and it was evident that they were going to provide us with as much help as possible. During this meeting the authors and Dep-uty CEO discussed the theories that the authors had read before the meeting occurred, and wondered if it was something from those theories that was visible in their business
environment. The Deputy CEO insight to Cinnober helped the authors realize in what way they could implement their theoretical background about dynamic capabilities in born globals to shape the purpose of the thesis.
The next step was to find respondents within the firm that could clarify and accurately explain the firm’s capabilities function. That could also explain the process of changing the capabilities according to newly discovered market constraints and opportunities. As these capabilities were assumed to have a major part in the firm’s business, the au-thors’ assumption was that the persons that could describe these the best were indi-viduals that had a managerial role at Cinnober. The writers of the thesis assumed that these managers probably set the outlines for which new business opportunities to pur-sue and which to ignore, influenced by recognized market changes. Even though the employees working in the firm’s projects are probably the first ones to come in contact with the newly discovered opportunities, it is the managers at Cinnober that imple-ment them into the business model. The authors therefore concluded that the most effective and rewarding research method would be a qualitative method, where we in-terview managers at Cinnober to successfully extract and integrate the data needed for this thesis.
Most of the questions used in the interviews (the questionnaire used in the interviews is available in the appendices – figure 6) were structured to collect data about the firm’s dynamic capabilities. First the authors wanted to get a substantial look at their capabilities, to understand them and if the interviewee could recognize any. As men-tioned previously the financial crisis was incorporated into the questionnaire to get a clear example of how the firm used their capabilities. At the end there was a question about dynamic capabilities and their performance. The reason why this question was included was because it gave the authors a better understanding of how the dynamic capabilities impacted the firm on a daily basis and how they were used. A weakness with some of the questions was that they could be seen as quite broad, but it is im-portant to underline that it was intentional as the authors did not want to influence the interviewees’ answers too much which could make the answers less reliable.
A short presentation of the three managers interviewed and their position in the firm:
Deputy CEO: Deputy CEO holds a lot of knowledge about Cinnober because of the
po-sition this individual holds in the company.
Head of Business Development: Being head of business development the person
of-fered an interesting insight to Cinnober business and how they adapt to market chang-es.
CEO: The CEO had experience from the early days of Cinnober and could therefor
pro-vide the thesis with both current and earlier information about the firm’s capabilities and structure. The CEO also provided an excellent overview of the firm.
4.2.2 Interview Procedure and Strategy
Before conducting the interviews we contacted Cinnober via email where the authors first of all mentioned which persons they wanted to interview and asked if they were available. In the same email, the authors also described the thesis purpose. As an edu-cational aid the respondents also received some explanation of the theories and terms that would be mentioned in the interviews. This would provide the respondents with some prior knowledge and enhance the quality of the interview because the inter-viewees would understand the subject better and it would also decrease time wasted on explanation.
After the interviews were scheduled, two of the authors visited their office in Stock-holm where the interviews were conducted. Because of availability and time-constraints, two of the respondents (Deputy CEO and Head of Business Development) were interviewed at the same time for about fifty-six minutes. The significance of this will be discussed in the validity sections. The questions were still asked to both of the respondents and both of them responded to each question. The second interview was with the CEO, and its duration time was twenty-five minutes. Both of these interview activities were semi-structured (and conducted in English), meaning there was room for flexibility where the respondents were able to expand their answers further (Bailey,
2007). The interviewer could also ask the respondent to elaborate if there was a cer-tain question that needed to be clarified. Most of the questions (the questionnaire used in the interviews is available in the appendices – figure 6) were structured to col-lect data about the firm’s dynamic capabilities.
The two authors, who conducted the interviews, divided the interview work between them. One author asked the questions while the other took notes of the answers that were given. This separation of tasks made the interviews more efficient as one focused on the quality of the interview making the interviewee comfortable and asking the right questions, while the other authors focused on collecting all the vital data. The in-terviews were also recorded (after permission had been given to record) which made the data analysis process and the recognition of important data much easier. After the two interviews had been performed the process of transcribing the interviews was started. The respondents were also available for answering new questions after the in-terviews through email.
To increase the depth of data from the firm, the authors looked into Cinnober’s annual reports and website to gather some secondary data. It provided triangulation to the paper, which is using multiple data collection methods as it adds reliability on the pa-per’s quality. (Bailey, 2007) This provides an improved understanding of the firm’s dy-namic capabilities and the impact it has had over time. The annual reports of Cinnober provided a description of their market’s condition and the firms view on it after each fiscal year, which will be further shown in the result sections of this thesis. After the in-terviews and the secondary data had been gathered and finalized, the process of ana-lyzing the data followed.
4.2.3 Method of data analysis
To identify and locate the data, the authors of this thesis used focused coding (Bailey, 2007). This method includes putting data into conceptual groups, where in this case, the distinctions between the different groups were characterized by the data’s rele-vance to the different theories in the theoretical framework (Bailey, 2007). For
exam-ple, when the respondent talked about their product design being modified over time it fell under the category dynamic capabilities as it matched with that particular theo-ry. This procedure was conducted for all data conceived in this paper and resulted in giving the authors some clarity and pattern recognition for the analysis section. The upside of having different conceptual groups is that it gives an excellent overview of the data collected and provides possibilities to further scrutinize and make subgroups (Bailey, 2007). The size of the data was controllable and the data was clearly marked (by the respondent’s name, from which interview it came from and lastly the second-ary data).
In the analysis the authors of the thesis identified which capabilities mentioned from the interviews were truly dynamic capabilities and which were ordinary capabilities. This process was supported by the theories included in the theoretical framework.
4.2.4 Reliability
What can be the downside with implementing a qualitative research method is that there is a possibility that the authors lose their awareness of the issue and deviate from the original plan. The authors acknowledge this as a critical error that was im-portant to avoid. Thus, most of the questions were structured beforehand and based on academic theories not influenced by the interviewees’ answers. By using a semi-structured structure on the interviews this thesis was capable of exploring deviant in-formation and then afterwards return to the original plan (Bailey, 2007).
From a reliability perspective a semi-structured interview might cause some problems for the reader to achieve the same results when conducting the same method. This is true as the authors’ beliefs and reflections might differ and result in different focuses during the interview practice. This is something that is difficult to avoid and that the authors try to argue against in the research strategy section of the method by describ-ing the reasondescrib-ing behind the method.
As there are three authors of this thesis there are some risks of interpretation bias when it comes to the interview process and the data analysis section. As all people have different opinions and thoughts, so did the authors as to what was more im-portant to focus on in the paper. Thus it was crucial for the reliability of the thesis that the authors collaborate with each other when writing the thesis. In an attempt to solve this issue the authors tried to reflect upon the purpose of the thesis and not let their opinions direct the process of writing the thesis. Therefore the analysis method was a good way to harmonize the authors’ different considerations because there had to be an agreement on what data belonged under what category to make the paper more coherent.
The authors recognize that the respondents and the documents (annual reports) from the company reflect some bias of the firm to present an attractive profile to people outside the firm. To reduce impartiality, the strategies implemented have been care-fully analyzed to minimize the risk of it having an effect on the finalized product of the thesis. The questions were mainly structured on the theories from the different articles which add some reliability to the data.
4.2.5 Validity
Because the first interview had to include two of our targeted candidates, for time-restraint purposes from the company, there might be a justified concern that the re-spondents’ answers did not reveal their own reflections. The purpose of interviewing these representatives was because of their embedded knowledge of Cinnober. So it is natural that their answers should, to a certain amount, echo each other’s opinion as well as the company’s view of the topic. Taking this into consideration, the view of the authors is that this issue is not significant enough to interpret these results as invalid. It can also add some strength to the data because if there are some disagreements on an answer the interviewers could address the matter directly as the moment occurred.
The semi-structured method chosen increased the level of trustworthy data in this par-ticular interview scenario. If any of the individuals interviewed said something
unex-pected that we wanted further explained, the interviewers could interrupt the struc-ture of questioning and direct full attention to what the respondent said and ask fol-low up questions to get a more clarified picture of it.
As mentioned earlier in this part, the firm that this paper did its case study on is a firm that deals with a high pressure market where there is little time available. Because of this when the authors were able to get appointments to conduct interviews they knew that it could not be a long interview process. As the reader can see in the question-naire (appendices – figure 6), the questions were structured to go straight to the point but, important to mention, there was still room for flexibility to reach extra data. To ensure that the respondent knew the basis of the questions that were going to be asked during the interview, the authors sent out an email beforehand to enlighten the respondents on the theories and definitions used in the thesis. This email served as an educational tool to inform the respondents of the different theories and definitions that the thesis had embraced. The time-constraint does raise questions about the data in terms of whether perhaps more could have been covered. The authors do feel that the answers given were pleasing for our purpose to reach some analytical results. Im-portant to recognize is that the method used is a qualitative research method and therefore the quantity of interviews should not be the issue but the quality of the data the authors of the thesis succeeded to gather (Eriksson, & Kovalainen, 2008). There is a justified concern that there is more empirical data that could have been collected if more interviews had been conducted and it is something that will be further men-tioned in the discussion section (further studies) of the thesis.
A draft of the analysis and the data gathered from the interviews has been shown to the respondents involved, they approved the content and that adds some validity to the thesis as their insight to the material used in the thesis is undisputable (Yin, 2003).
5 Empirical findings
In this section the empirical findings of our data collection will be presented. This sec-tion will provide an analytical framework that will guide the remainder of this thesis. The purpose of this thesis is to explore firm-specific dynamic capabilities of a high-tech born global, and to understand how this firm can adapt to a rapidly changing environ-ment. In order to reach a high level of depth in our discussion this chapter is divided in-to two main parts.
The first part will include the secondary data research and will describe Cinnober dur-ing the financial crisis, both in terms of the global financial market and also their main activities during this period. The financial crisis will be an important focus in this thesis, and with the goal of giving the case study more depth, help to fully understand how a firm in a rapidly changing environment uses its dynamic capabilities to adapt and sur-vive. The aim of this part is to provide a context to our case study, in which we can fully explore the company’s firm-specific dynamic capabilities.
The second part will present our primary data research gathered from the interviews that have been conducted. This part will go into depth to ascertain the actual dynamic capabilities of Cinnober that they possess currently. In addition it will also further ex-plore the company’s dynamic capabilities during the financial crisis.
The structure of this chapter will follow:
1. A description of the company
2. Cinnober through the financial crisis
3. Present the dynamic capabilities of Cinnober
5.1 The Company
As the focus of the thesis will be centered on one specific firm (Cinnober) the begin-ning of this chapter will present a description of the company.
The information below about this company will be presented, including its history, ser-vice and market in which it operates in. This will provide an overview of the company and the context for the research of this thesis.
At the very beginning of the company in 1998 in Stockholm (Sweden), the company set out to develop and provide a platform for financial transactions (Cinnober AB, 2014). From inception, the company targeted the global market and has ever since grown in-to a profitable company with a net sales of 295.8 (SEK million) in the financial year of 2012/2013, and with over 230 employees working there (Cinnober Annual Report 12/13, 2014). Today Cinnober has grown into a knowledge intensive company where the majority of the employees have a background in financial information technology and computer programming. It operates globally with major financial players such as exchanges, banks, clearinghouses and brokerages, and delivers systems on nearly all continents. These customers are for example: Deutsche Börse, Dubai Gold & Commodi-ties Exchange, Eurex, London Metal Exchange, Markit BOAT and Stock Exchange of Thailand (Cinnober website). To conclude, it is a born global high-technology company offering services in the financial market (Cinnober Annual Report 12/13, 2014).
The company service focuses on two distinct niches in the financial market: trading and clearing. Solutions they offer within these two areas are for example price discov-ery, order matching, market data, settlement and surveillance. This service is based on a java-based platform the company calls “TRADExpress”. What separates Cinnober from its competitors is the fact that they are an independent provider of financial technology. This means that they are independent from financial actors with vested in-terests such as individual exchanges or investment banks. Cinnober has many competi-tors which are often found in financial marketplaces systems. Their main competitor is NASDAQ OMX Group, owner of the NASDAQ American stock exchange (Cinnober An-nual Report 12/13, 2014).
Cinnober’s annual report from 2012/2013 summarizes their current position by ex-plaining: “The global financial market is a continuously changing landscape, to which all
id pace of change to be a strong driving force when it comes to development and suc-cess. Our customers are marketplaces, clearinghouses, banks and brokerages around the world. Our foremost task is to help these customers implement innovative changes to gain new positions faster than their competitors”. The fact that customers in various countries need to use specialized software adhering to different financial regulations that are likely subject to change, makes Cinnober a compelling candidate for investi-gating the use of its capabilities in such a globally dynamic environment.
In the next part the thesis will briefly introduce the financial crisis and how it is highly relevant and interesting to assess in the context of Cinnober and its dynamic capabili-ties. This will serve as an introduction to our secondary data research where we will zoom in and assess the market situation for Cinnober during this period and how Cin-nober responded to it through its activities.
5.1.1 The 2008 Financial Crisis
Briefly summarizing the events that occurred during the global financial crisis, it began with rapidly falling real estate prices in the USA in 2007. As this continued into 2008, the value of investments tied to real estate (e.g. mortgage-backed securities and col-lateralized debt obligations) fell by the billions. The credit markets seized up (making it extremely difficult to borrow money) and the value of major financial institutions col-lapsed. The government intervened to save some of these large companies, but it is possible that this led to even more panic in the financial world. More financial institu-tions ended up collapsing and the stock markets crashed, resulting in the worst finan-cial crisis since the Great Depression of 1930s. This was a period in which changes in the global market were frequent and resulted in dynamic environments for companies involved. As a consequence of this crisis, many new financial regulations required im-plementation to help prevent such a crisis from occurring again (Guynn, 2010).
As a born global company with customers in many different countries, Cinnober has had to adapt to these kinds of changes in regulations. These changes have opened up for new opportunities. Potential customers for Cinnober need help in adapting to this
